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J K Cements Ltd Research Report - 21st Jan 2016

Cement | Published on Nov 05th 2015


JK Cement (JKCem)’s 2QFY2016 reported numbers have come in better than our estimates. The company’s net sales grew by 4.8% yoy to Rs867.9cr (above our estimate of Rs832.2cr). The company’s blended sales volume increased by 2.8% yoy, led by 4.3% yoy growth in the white cement (including putty) business. Blended realization/tonne, at Rs4,743, increased 2.0/6.3% yoy/qoq during the quarter (above our estimate of Rs4,596). The EBITDA increased by 21.4% yoy to Rs106.4cr, which is above our estimate of Rs97.1cr. The EBITDA/tonne improved by 18.1% yoy to `581 and is above our estimate of Rs536. The Net profit declined 57.5% yoy to Rs13.7cr, on account of higher depreciation and interest expenses. EBITDA margin at 12.3%, up 167bp yoy: For 2QFY2016, JKCem posted a marginal 4.8% yoy increase in its top-line to Rs867.9cr. The EBITDA came in at Rs106.4cr, an increase of 21.4% yoy (above our estimate of Rs97.1cr). The EBITDA margin at 12.3% is above our estimate of 10.8%, led by better than expected realization and flat operating costs. The operating cost/tonne remained flat yoy at Rs4,161. The EBITDA/tonne came in at Rs581, up by 18.1% yoy, due to increase in realization and flat operating costs. Outlook and valuation: Going ahead, we expect the company to witness moderation in demand and impact on profitability. The Management has also reduced its grey cement volume guidance from 7.5mt to 6.5mt for FY16 due to soft demand. We forecast top-line to grow at a CAGR of 18.4% and EBIDTA to grow at CAGR of 33.3% over FY2015-17E. At the current market price, the stock trades at 7.8x FY2017E EV/EBIDTA and EV/tonne of $96 on FY2017E blended capacity. We maintain our Buy rating on the stock with a target price of Rs744 based on 8.0x grey cement and 9.5x white cement FY2017 EV/EBIDTA.

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CMP 647
Target Price 744
Investment Period12 Months

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Shareholding Pattern (%)

Public & Others7.0
Grand Total100.0

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